Coalition calls for rejection of Exelon-Pepco merger

Pepco employee James Tarantella climbs out of a bucket after fixing a blown fuse on a power outage call on Monday August 13, 2012 in Rockville, MD.

Pepco employee James Tarantella climbs out of a bucket after fixing a blown fuse on a power outage call on Monday August 13, 2012 in Rockville, MD. (Photo by Matt McClain for The Washington Post)

Natalie Sherman,The Baltimore Sun

A 20-group coalition on Thursday called on state regulators to reject a proposed merger between Chicago energy giant Exelon Corp. and Pepco Holdings Inc., citing Exelon's track record on the environment and fears the deal would give it too much power in the state.

Exelon, the parent company of Baltimore Gas and Electric Co., ComEd and PECO, in April announced a $6.9 billion deal to acquire the smaller Washington-based utility company, which owns Delmarva Power and Atlantic City Electric as well as Pepco. Pepco and Delmarva Power together serve about 768,000 customers in Maryland.

If approved, the merger would give Exelon among the highest number of ratepayers in the country, adding about 2 million Pepco Holdings clients to its 7.8 million customers.

Advocates said they are opposed to Exelon increasing its hold in Maryland, citing the company's history of opposition to policies that would encourage transition to renewable energy, such as its lobbying against the renewable energy Production Tax Credit, which encourages development of wind power.

"We should be a leader in clean energy. ... Exelon is moving in the wrong direction," Mike Tidwell, director of the Chesapeake Climate Action Network, said at a news conference on Federal Hill. "We are here today not to say that the merger as proposed is not good enough. We're here to say no. ... We do not see any pathway forward."

In filing for approval with Maryland regulators in August, Exelon and Pepco said combining forces would create cost savings, increase reliability and improve response to weather events. After the deal was announced, analysts also said the merger would give Exelon access to another stream of reliable customer payments, helping to balance its unpredictable power-generation business.

Exelon pledged a $100 million consumer investment fund, of which $40 million would go to Maryland. It also said it would honor collective bargaining agreements and avoid merger-related layoffs at the acquired companies for two years after the deal goes through.

But advocates said Thursday that the deal would create a risk of increased rates for customers. It would give Exelon control over more than 80 percent of the Maryland market, as well as power over nearly a quarter of the transmission service credits in the regional electricity grid, they said.

The company is also likely to work against clean energy proposals that could help customers, advocates said.

"We're concerned that this merger does not serve the public interest … and could raise rates for Maryland families," said Emily Scarr, director of Maryland PIRG.

Exelon spokesman Paul Elsberg said in a statement that the firm expects to pass cost saving onto customers "over time," ultimately lowering rates. He said renewable energy is a growing part of the firm's portfolio, pointing to its commitment to developing 125 megawatts of wind and solar energy in Maryland alone.

"The coalition's claims about the impact of the proposed merger of Exelon and Pepco Holdings are inconsistent with Exelon's track record and ignore the commitments Exelon has made as a condition of the merger to deliver substantial benefits to Maryland customers and communities," he wrote in an email.

The merger needs approval from regulators in Maryland, New Jersey, Delaware and Washington.

Regulator demands caused a proposed merger between Pepco and BGE to fall through in 1997. Exelon also walked away from an effort to acquire a New Jersey utility in 2006 in the face of regulator demands.

Advocates said Maryland's Public Service Commission likely represents the biggest hurdle for the firms, since state law requires that the deal benefit the public interest.

"This merger is not a done deal," Tidwell said, whose group has formally petitioned to intervene in the case. Other members of the coalition at Thursday's news conference included Washington-based consumer watchdog Public Citizen, Maryland's Sierra Club and the Central Maryland Ecumenical Council.

Pepco's shareholders approved the proposal last week. State hearings in Maryland are scheduled to begin in January, with a decision slated to be announced in April.